Tech Mahindra expects Indian biz to weather 2G scam concerns

| Updated on: Feb 06, 2011

Tech Mahindra does not see any immediate impact of the 2G scam on its domestic business despite being a vendor to one of the operators named by the investigating agencies as being embroiled in the fiasco.

In fact, its President of IT Services, Mr L. Ravichandran, has singled out India, the Middle East and Africa as regions which could grow faster this year.

“There is some concern on the 2G scam but it has not yet hit IT spend in the country. We are yet to see any telecom operator reducing focus on IT since it is a part and parcel of the entire (telecom) business,” he told Business Line in a telephonic interview.

The 2G spectrum scam involved government officials illegally undercharging select mobile telephony companies for frequency allocation licences, which they would use to create 2G subscriptions for cell-phones.

According to a report submitted by the Comptroller and Auditor General, the loss to the exchequer, based on money collected from 2G licences, was Rs 1.76-lakh crore.

In September 2009, Etisalat DB, one of the companies named by the Central Bureau of Investigation as being given preferential treatment by the then telecom minister Mr A. Raja while awarding new telecom licences, had agreed to outsource implementation of its software applications and IT infrastructure to Tech Mahindra as part of a $400-million (around Rs 1,950-crore) deal. “The deal is very much on. The software is getting deployed and additional things are happening on the ground. We are also doing some amount of call-centre work for them. There is no concern at the moment,” said Mr Ravichandran.

Revoking of licence

However, the situation could dramatically change if the Centre is compelled to take the unlikely step of revoking the 2G licences of those companies named by the CBI.

Says Mr Kunal Bajaj, Director India, of strategic consultancy firm, Analysys Mason: “If the telcos' operations get jeopardised, then the IT engagements will also follow suit. Many of these managed services contracts are revenue share deals where the vendor makes the upfront capital investment while payments happen over a period.”

In other words, the business for a service provider increases proportionately with increase in revenues and number of subscribers of a telecom operator.

Mr Ravichandran is betting big on services such as 3G, mobile number portability and broadband wireless access to trigger the next round of growth for IT companies in India. “Many of the new operators started with basic IT infrastructure in a hurry to launch services in the last two to three years. Now with 3G and MNP, telcos have entered into a maturity phase and there is a lot going for incremental business intelligence and analytics work in India,” he said.

In India, the company is in talks with telecom operators as well as telecom equipment makers for outsourcing contracts in systems integration, application development and maintenance and managed services.

Published on February 07, 2011

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